Investing in property through a Self Managed Super Fund (SMSF) is a strategic way to grow your retirement savings while diversifying your investment portfolio. At Altias Advisory, we provide expert guidance to help you navigate the complexities of SMSF property investment. Below we outline the key steps and benefits of purchasing an investment property through your SMSF.

Why Invest in Property through Your SMSF?

  1. Diversification: Adding property to your SMSF portfolio diversifies your investments, reducing overall risk.
  2. Potential for Capital Growth: Property has historically shown significant capital growth, which can enhance your retirement savings.
  3. Rental Income: Rental income from the property can provide a steady cash flow, contributing to your SMSF’s income.
  4. Tax Benefits: SMSFs enjoy concessional tax rates, which can enhance the after-tax returns on your property investment.

 

Step-by-Step Guide to SMSF Property Investment

1. Establishing Your SMSF

To invest in property, you must first establish a compliant SMSF. This involves:

  • Setting Up the Trust and Trust Deed: Creating a trust and a trust deed that outlines the rules for operating your SMSF.
  • Appointing Trustees: Selecting trustees who will manage the SMSF. They can be individual trustees or a corporate trustee.
  • Registering for an Australian Business Number (ABN) and Tax File Number (TFN): These are necessary for the SMSF’s tax and administrative purposes.

2. Formulating an Investment Strategy

Your SMSF must have a documented investment strategy that aligns with your retirement goals and risk tolerance. This strategy should include:

  • Investment Objectives: Clearly defined goals for the fund.
  • Risk Management: Strategies to manage investment risks.
  • Asset Allocation: Guidelines on how to allocate SMSF assets across different investment classes, including property.

3. Obtaining Finance

While your SMSF can purchase property outright if it has sufficient funds, many SMSFs use a Limited Recourse Borrowing Arrangement (LRBA) to finance part of the purchase. This involves: 

  • Securing a Loan: Applying for an LRBA through a lender.
  • Structuring the Loan: Ensuring the loan structure complies with SMSF regulations, where the lender’s recourse is limited to the property being purchased.

4. Finding the Right Property

When selecting a property for your SMSF, consider:

  • Investment Potential: Properties with strong potential for capital growth and rental income.
  • Location: Areas with high demand and future growth prospects.
  • Property Type: Residential, commercial, or industrial properties, each with different investment dynamics. 5.

5. Completing the Purchase

The purchase process involves:

  • Property Appraisal: Conducting due diligence and obtaining property valuations.
  • Legal and Compliance Checks: Ensuring the property purchase complies with SMSF regulations.
  • Settlement: Finalising the purchase and transferring the property title to the SMSF.

6. Managing the Property

Post-purchase, effective property management is crucial:

  • Tenant Management: Finding and managing tenants to ensure a steady rental income.
  • Maintenance and Repairs: Keeping the property in good condition to preserve its value.
  • Ongoing Compliance: Ensuring continuous compliance with SMSF regulations.

 

Key Considerations and Restrictions

When investing in property through your SMSF, there are several important considerations and restrictions:

  • Sole Purpose Test: The property investment must meet the sole purpose test, ensuring it provides retirement benefits to SMSF members.
  • In-House Asset Rule: The property must not be acquired from a related party of the SMSF, nor can it be leased to a related party, unless it qualifies as business real property. 
  • Borrowing Rules: Any borrowing must be through an LRBA, and the property cannot be used as security for other loans.
  • Property Improvements: Improvements to the property can be made using SMSF funds, but any borrowed money can only be used for property maintenance and repairs.

 

Partner with Altias Advisory 

At Altias Advisory, we specialise in helping clients maximise their SMSF potential through strategic property investments. Our comprehensive services include:

  • Expert Advice: Personalised guidance tailored to your financial goals.
  • Financial Planning: Our wealth managers will help you craft your ideal investment strategy with your end goal in mind to ensure you retire financially secure. Further our accountants will check everything from your budget to your taxes, and if financing we will help you plan your cashflow for rate changes, and pay off the principal of the loan as quickly as possible.
  • Total Financial Impact: We prepare you for the total financial impact of buying the property, limiting your liability, conserving your debt, and explaining the long-term interest payments, whether on a fixed or variable rate. 
  • Tax Planning: For those buying property through a SMSF, we provide advice on maximising your tax planning, ensuring you have all the necessary information upfront and are well-prepared with any questions.

 

Start Your SMSF Property Investment Journey Today!

Take control of your retirement savings and explore the benefits of property investment through your SMSF. Contact Altias Advisory to learn more and begin your journey toward financial freedom.

 

The information contained above has been provided as general advice only. The contents have been prepared without taking account of your objectives, financial situation or needs. You should, before you make any decision regarding any information, strategies or products mentioned, consult your own financial advisor to consider whether that is appropriate having regard to your own objectives, financial situation and needs.